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GENERAL AGREEMENT on TARIFFS and TRADE Limited GENERAL AGREEMENT ON RESTRICTED L/7028 29 June 1992 TARIFFS AND TRADE Limited Distribute Original: Spanish ACCESSION OF HONDURAS Memorandum on Foreign Trade Régime The following Memorandum on the Foreign Trade Régime has been received from the Government of Honduras. In order that the matter may be examined by the Working Party (L/6735), contracting parties are requested to communicate to the secretariat by 30 July 1992 any questions they may wish to put concerning the matters dealt with in the Memorandum, for transmission to the authorities of Honduras. 92-0879 L/7028 Page 2 CONTENTS Page FOREWORD 5 I. THE HONDURAN ECONOMY 6 1.1 Introduction 6 1.2 Structure and performance of the Honduran economy 6 1.3 Foreign trade, balance of payments and external debt 9 1.3.1 Foreign trade 9 1.3.2 Balance of payments 12 1.3.3 External debt 13 1.4 The structural adjustment programme launched in March 1990 and its results 14 II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES 18 2.1 Introduction 18 2.2 Institutional framework 18 2.3 Structure of trade policy formulation 18 2.4 The new trade policy 20 III. EXPORT POLICY 21 3.1 Introduction 21 3.2 Legal provisions 21 3.3 Export taxes and charges 22 3.4 System of export incentives 22 3.4.1 Export promotion 22 3.4.2 Export promotion customs régimes 22 3.4.3 Temporary Import Régime (RIT) 23 3.4.4 Industrial Processing Zones for Export Trade (ZIP).. 24 3.4.5 Banana export incentives 24 3.4.6 Technical assistance 25 L/7028 Page 3 Page IV. IMPORT POLICY 26 4.1 Introduction 26 4.2 Legal provisions 26 4.3 Characteristics of the tariff régime 28 4.4 Other import levies 29 4.4.1 Surtaxes 29 4.4.2 Selective consumption tax 29 4.4.3 Production and consumption tax 30 4.4.4 Sales tax 30 4.5 Customs rules and procedures 30 V. TRADE RELATIONS AND AGREEMENTS WITH OTHER COUNTRIES 33 5.1 Introduction 33 5.2 Economic Community of the Central American Istmus 33 5.3 Partial-scope agreements 34 5.4 Other trade agreements 35 VI. OTHER TRADE-RELATED ASPECTS 36 6.1 Introduction 36 6.2 Exchange policy 36 6.3 Legislation recently adopted or in the course of approval. 38 STATISTICAL TABLES 41 Table 1 Gross Domestic Product by Economic Activity 42 Table 2 Balance of Payments of Honduras 43 Table 3A Honduras : Total External Debt 44 Table 3B Honduras : Public External Debt 45 Table 4 Honduras: Selected Macro-Economic Indicators, 1989-1991 46 L/7028 Page 4 Page Table 5 Duties and Charges on Exports 47 Table 6 Honduras : Production and Consumption Taxes 48 LIST OF ANNEXES 50 L/7028 Page 5 FOREWARD This Memorandum on the Foreign Trade Régime of Honduras has been prepared in the context of the process of the country's accession to GATT. The Memorandum will serve as a basis for discussion in the Working Party on the Accession of Honduras established by the GATT Council. The Memorandum includes a brief account of the Honduran economy, including its structure and performance, developments in foreign trade, the balance of payments and foreign debt, and the features of the Structural Adjustment Programme (Chapter I). This is followed by a description of the current trade policy régime (Chapter II). The current export and import policies are described in detail in chapter III and Chapter IV, respectively. Chapter V deals with trade relations between Honduras and the other Central American countries and trade agreements with other countries. The final chapter summarizes other measures relating to foreign trade, including exchange policy and legislation recently adopted or in the process of enactment. The Memorandum describes measures and legal provisions in force at the time of its preparation as well as measures that are in the course of adoption. It should be noted, however, that the Government of Honduras will inform contracting parties in a timely manner, through the GATT secretariat, of any new measures adopted in relation to the matters covered in the Memorandum. L/7028 Page 6 I. THE HONDURAN ECONOMY 1.1 Introduction The Republic of Honduras is situated in Central America and has an area of 112,088 km. , with a territory characterized by an irregular topography consisting of mountain systems and valleys of varying fertility. Almost two thirds of the territory consist of pine forests and broad-leafed forests, which form large and complex ecosystems; 68 per cent of the country's total forestry resources are considered productive and as having economic potential. Honduras is one of the relatively least-developed countries in the western hemisphere, with a per capita GDP of US$540 in 1990; 41 per cent of the population over fifteen years of age are illiterate; 37 per cent of children under five suffer from some degree of malnutrition; the infant mortality rate is 58 per 1000 live births; and 221 mothers die in childbirth for every 100,000 births. It is estimated that 56 per cent of households are below the poverty line, and as many as 68 per cent in rural areas; 34 per cent of dwellings do not have drinking water and 45 per cent lack sewage services. In 1990, the population of Honduras was estimated at 4.7 million, with an annual growth rate of 2.8 per cent, and was primarily concentrated in rural areas, where six out of ten inhabitants live. In recent years the urban population has grown more rapidly, primarily because of migration from the countryside. Population density is uneven, with departments where it is below three inhabitants per km. contrasting with departments where it is over 100. Average density for the whole country is about forty inhabitants per km. This chapter describes, in the context of the 1980s, the structure and performance of the Honduran economy, the importance of foreign trade and the impact of external debt. It also includes a detailed analysis of the elements of the Structural Adjustment Programme launched in March 1990 and an evaluation of its results as at December 1991. 1.2 Structure and performance of the Honduran economy Honduras has an open economy: in the period 1989-1991 the sum of exports and imports of goods represented an average of 56 per cent of the gross domestic product. The majority of exports are agricultural products, primarily bananas and coffee. The chief imports are raw materials and building materials, consumer goods, capital goods and to a lesser extent fuels and lubricants. L/7028 Page 7 A breakdown of GDP by branch of activity shows that agriculture is the most important sector of the Honduran economy (see Table 1), employing over 50 per cent of the labour force and generating 25.2 per cent of the gross domestic product. The main products are bananas, coffee and produce for: domestic consumption, primarily staple grains (maize, kidney beans and rice). The exportable supply of the sector consists primarily of bananas, coffee, shrimp and lobsters, cattle, tobacco and cotton; in total these generate 61 per cent of the gross value of the sector's production and 80 per cent of exports of goods. In the 1980s, the sector performed unevenly, with sharp drops in the early years, basically owing to the world economic recession that depressed coffee and banana prices. In the second half of the decade there were significant recoveries, primarily attributable to better world coffee prices and higher banana production. The average growth rate for the sector during the decade was 2.9 per cent. The industrial sector (including construction) accounts for 20 per cent of GDP, and employs roughly 16 per cent of the labour force. Production consists primarily of goods for domestic consumption. The biggest industry is the food and beverages industry, which generates about a third of value added and accounts for 25 per cent of industrial employment. Food production concerns primarily dairy products, oils, flour and sugar. It is estimated that the consumer goods industry accounts for 72 per cent of value added and 81.3 per cent of employment in the sector, followed in importance by intermediate goods and the metal manufactures and engineering industry. The production structure of this sector is the result of an import substitution strategy launched in the 1950s and aimed at production for the domestic and Central American markets. Nevertheless, the country has a large export potential in the manufacturing branches that are natural-resource and labour-intensive, such as food, wood products and made-up textile products. In recent years growth in the industrial sector has been in line with the GDP growth rate, and hence its share of the total product has remained virtually stable, with a slight decline at the end of the decade primarily owing to problems in the obtention of foreign exchange, which is vital for the sector since it is a net importer of inputs and capital goods. Hence, its performance is closely linked with prevailing trends and conditions in the export sector, through foreign-exchange earnings and the stimulation of domestic demand. L/7028 Page 8 The services sector represents 35.8 per cent of the gross domestic product and employs a little over 30 per cent of the labour force. Trade is the most important activity in this sector, followed in importance by personal services, public administration and financial services. Honduras has made great efforts to improve and expand the infrastructure supporting the production sector. As far as transport is concerned, the country now has a relatively developed primary and secondary network.
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